How Can A Small Business Thrive During a Recession?
In 2008 we were two years into our scrappy start-up agency, Webbed Marketing. We were founded in 2006 before the days of ubiquitous SEO shops. We were growing, winning excellent clients, and attracting the right talent.
Some people much older and wiser warned me about what was heading toward us. The impending financial crisis would be brutal and long-lasting. It would be the worst economic crisis since the Great Depression. I was a first time founder and not remotely equipped to navigate what was ahead.
But, I’d worked for startups my whole career and kept in touch with my former bosses. My mentors had weathered the dotcom bubble and bust. They’d weathered the WorldCom and Enron crisis. Thanks to their advice and a few lucky breaks we not only survived, we doubled revenue in 2008 and again in 2009 and again in 2010.
After 2008 there was the public market crash in August 2011, COVID, and a few smallar bumps in between. Overall, I’ve learned a lot about the signs of recession and what steps a small business should take to prepare, navigate and succeed during a recession. Here are the market forces I’ve seen come to bear in a recession, how we’ve responded.
- Your competitive market thins out. I don’t wish ill on anyone. However the fact is a lot of your competitors won’t make it through. In 2008 more than half of our regional competitors closed up shop. Maybe they are priced too high or too low. Too niche or not niche enough. They have some flaw in their business plan and won’t make it. That means their clients, and their team members, are looking for a business like yours.
- The need to outsource increases. Your clients still need to get the same amount of work done, maybe even more than ever. At the same time, they lack the full time staff to do it all. During downturns we frequently get calls from organizations who just did a round of layoffs and need to outsource work immediately, resulting in some of our shortest sales cycles.
- Budgets shift. Organizations cut what they perceive as “nice to have” spending first. I spent years in the training industry and while I personally believe training is vitally important, we found it was one of the first budget items to go. The CFO tells department heads “only spend money if it makes money.” So make sure what you are offering either makes money or cuts costs. At Webbed, we saw big brands cut TV, radio and print advertising and shift it to digital. In one notable conversation, a marketing VP told us that she was reallocating her “small” TV budget to digital and asked for a plan. Then she told us her small TV budget was $2 million and in 2008 it was really , really hard to spend $2 million online!
- Great talent becomes available. So does the Great Resignation feel like a million years ago? It was just six months ago we were all fighting for the same employees and now with hundreds of jobs in tech being cut daily, we are all getting great resumes. Hiring cycles are shortening.I believe we will still have more than enough jobs for everyone, but I think this correction means great talent is on the market for the next opportunity. Here is your chance to hire them!
- Inflation slows (historically). Like the rest of you, we’ve watched all our costs, from salary and benefits to software license and pizza soar the last 18 months. Prices, especially real estate prices, dropped fast in 2008. Since we were growing fast and paying competitive salaries, this allowed many of our younger team members to buy their first homes. The stability of homeownership changes a person in and out of the office. At the same time, anxiety caused by house hunting, or just generally rising costs, works its way into the office. A slowing of inflation helps the company bottom line and improves team members’ mental health.
- Opportunities arise. 2008 and 2020 were terrible times in many ways. But if you had the means and nerve, it was a fabulous time to buy a home. If you’re looking to acquire a competitor, or renegotiate a software license, or buy a commercial property, or book a killer conference venue, 2023 may just be the year to do it. Millionaires are made in recessions.
A good friend of mine recently turned me on to “Stoic” related philosophy and literature. One of the fundamental tenets of stoicism is that we don’t control what happens, but we have 100% control over our response. Another core tenant is that the obstacle is the way.
I invite you to look at 2023 and any obstacles it throws at you, as the way to make it the best year it can be.